TGT Target Corp

• Fourth quarter comparable sales decreased 1.5 percent, compared to the guidance range of (1.5%) to (1.0%)1.
• Fourth quarter comparable digital channel sales increased 34 percent, contributing 1.8 percentage points of comparable sales growth.
• Fourth quarter comparable sales growth in Signature Categories outpaced total comparable sales by nearly 3 percentage points.
• Fourth quarter comparable traffic increased 0.2 percent.
• Fourth quarter GAAP earnings per share (EPS) from continuing operations of $1.46 and Adjusted EPS2 of $1.45, compared with the Company’s guidance range of $1.45 to $1.55.
• For full-year 2016, GAAP EPS from continuing operations declined 12.7 percent to $4.58, reflecting a loss of $0.44 on the early retirement of debt.
• Full-year Adjusted EPS2 increased 6.7 percent to $5.01.
• Target returned $5.0 billion to shareholders in 2016 through dividends and share repurchases.

Target Corporation (NYSE: TGT) today announced its fourth quarter and full-year 2016 results. The Company reported GAAP earnings per share (EPS) from continuing operations of $1.46 in fourth quarter and $4.58 for full-year 2016, compared with $2.31 and $5.25 in 2015, respectively. Fourth quarter Adjusted EPS were $1.45, down 4.6 percent from $1.52 in 2015. Full-year Adjusted EPS of $5.01 was 6.7 percent higher than $4.69 in 2015. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

“Our fourth quarter results reflect the impact of rapidly-changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores,” said Brian Cornell, chairman and CEO of Target. “At our meeting with the financial community this morning, we will provide detail on the meaningful investments we’re making in our business and financial model which will position Target for long-term, sustainable growth in this new era in retail. We will accelerate our investments in a smart network of physical and digital assets as well as our exclusive and differentiated assortment, including the launch of more than 12 new brands, representing more than $10 billion of our sales, over the next two years. In addition, we will invest in lower gross margins to ensure we are clearly and competitively priced every day. While the transition to this new model will present headwinds to our sales and profit performance in the short term, we are confident that these changes will best-position Target for continued success over the long term.”

 

1On Jan. 18, 2017, Target updated fourth quarter guidance for comparable sales, GAAP EPS from continuing operations, and Adjusted EPS.

 

2Adjusted EPS, a non-GAAP financial measure, excludes the impact of certain discretely managed items. See the “Miscellaneous” section of this release, as well as the tables of this release, for additional information about the items that have been excluded from Adjusted EPS.

 

Fiscal 2017 Guidance

Target’s 2017 guidance reflects the impact of the Company’s transition to a new financial model, which will be covered in the Company’s meeting with the financial community later today.

In first quarter 2017, Target expects a low-to-mid single digit decline in comparable sales, and both GAAP EPS from continuing operations and Adjusted EPS of $0.80 to $1.00.

For full-year 2017, Target expects a low-single digit decline in comparable sales, and both GAAP EPS from continuing operations and Adjusted EPS of $3.80 to $4.20.

First quarter and full-year 2017 GAAP EPS from continuing operations may include the impact of certain discrete items, which will be excluded in calculating Adjusted EPS. In the past, these items have included losses on the early retirement of debt, data breach expenses, restructuring costs, and certain other items that are discretely managed. The Company is not currently aware of any such discrete items.

Segment Results

Fourth quarter 2016 sales decreased 4.3 percent to $20.7 billion from $21.6 billion last year, reflecting a 1.5 percent decline in comparable sales combined with the removal of pharmacy and clinic sales from this year’s results. Comparable digital channel sales grew 34 percent and contributed 1.8 percentage points of comparable sales growth. Segment earnings before interest expense and income taxes (EBIT), which is Target’s measure of segment profit, were $1,344 million in fourth quarter 2016, a decrease of 13.5 percent from $1,554 million in 2015.

Fourth quarter EBITDA and EBIT margin rates were 9.5 percent and 6.5 percent, respectively, compared with 9.8 percent and 7.2 percent, respectively, in 2015. Fourth quarter gross margin rate was 26.9 percent, compared with 27.9 percent in 2015, reflecting markdown pressure from promotional and clearance activity and costs associated with the mix shift between the Company’s store and digital channels, partially offset by the benefit of the sale of the Company’s pharmacy and clinic businesses, a favorable merchandise mix, and cost of goods savings. Fourth quarter SG&A expense rate was 17.5 percent in 2016, compared with 18.1 percent in 2015, reflecting the benefit of the sale of the Company’s pharmacy and clinic businesses and continued expense discipline across the organization.

Interest Expense and Taxes from Continuing Operations

The Company’s fourth quarter 2016 net interest expense was $140 million, compared with $152 million last year. Fourth quarter 2016 effective income tax rate from continuing operations was 32.0 percent, compared with 29.6 percent last year. Last year’s tax rate reflected the impact of the gain on the December 2015 sale of the pharmacy and clinic businesses.

Shareholder Returns

The Company returned $902 million to shareholders in fourth quarter 2016, including:

• Dividends of $337 million, compared with $345 million in fourth quarter 2015.
• Share repurchases totaling $565 million, including:
  • Open market transactions that retired 3.2 million shares of common stock at an average price of $66.52, for a total investment of $211 million.
  • An accelerated share repurchase (ASR) agreement that retired 4.6 million shares of common stock at an average price of $76.77, for a total investment of $355 million.

As expected, during the fourth quarter the Company completed its previous share repurchase program, which was approved in 2012 and extended to $10 billion in 2015. Upon completion of the prior program, the Company began repurchasing shares under its current $5 billion share repurchase program, which was approved in September 2016. Under the current program, the Company invested $264 million in the fourth quarter, leaving approximately $4.7 billion remaining under the current program at the end of the quarter.

For the trailing twelve months through fourth quarter 2016, after-tax return on invested capital (ROIC) was 15.0 percent, compared with 16.0 percent for the twelve months through fourth quarter 2015. Last year’s ROIC rate reflected the benefit of the gain on the December 2015 sale of the pharmacy and clinic businesses. Excluding that benefit, ROIC for the twelve months through fourth quarter 2015 was 13.9 percent. See the “Reconciliation of Non-GAAP Financial Measures” section of this release for additional information about the Company’s ROIC calculation.

Webcast Details

Target will webcast its financial community meeting, including Q&A, at 8 a.m. CST today. Investors and the media are invited to listen to the meeting at Investors.Target.com (hover over “company” then click on “events & presentations” in the “investors” column). A replay of the webcast will be available beginning at approximately 1 p.m. CST today.

Miscellaneous

Statements in this release regarding first quarter and full-year 2017 earnings per share and comparable sales guidance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties which could cause the Company’s actual results to differ materially. The most important risks and uncertainties are described in Item 1A of the Company’s Form 10-K for the fiscal year ended Jan. 30, 2016. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update any forward-looking statement.

In addition to the GAAP results provided in this release, the Company provides Adjusted EPS for the three and twelve-month periods ended Jan. 28, 2017, and Jan. 30, 2016. The Company also provides ROIC for the twelve-month periods ended Jan. 28, 2017, and Jan. 30, 2016, which is a ratio based on GAAP information, with the exception of adjustments made to capitalize operating leases. Operating leases are capitalized as part of the ROIC calculation to control for differences in capital structure between the Company and its competitors. Adjusted EPS, capitalized operating lease obligations and operating lease interest are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. Management believes Adjusted EPS is useful in providing period-to-period comparisons of the results of the Company’s ongoing retail operations. Management believes ROIC is useful in assessing the effectiveness of the Company’s capital allocation over time. The most comparable GAAP measure for Adjusted EPS is diluted EPS from continuing operations. The most comparable GAAP measure for capitalized operating lease obligations and operating lease interest is total rent expense. Adjusted EPS, capitalized operating lease obligations and operating lease interest should not be considered in isolation or as a substitution for analysis of the Company’s results as reported under GAAP. Other companies may calculate Adjusted EPS and ROIC differently than the Company does, limiting the usefulness of the measure for comparisons with other companies.

About Target

Minneapolis-based Target Corporation (NYSE: TGT) serves guests at 1,802 stores and at Target.com. Since 1946, Target has given 5 percent of its profit to communities, which today equals millions of dollars a week. For more information, visit Target.com/Pressroom. For a behind-the-scenes look at Target, visit Target.com/abullseyeview or follow @TargetNews on Twitter.

  TARGET CORPORATION   Consolidated Statements of Operations                               Three Months Ended         Twelve Months Ended     (millions, except per share data) (unaudited)    

January 28,2017

    January 30,2016     Change     January 28,2017     January 30,2016     Change Sales $ 20,690     $ 21,626 (4.3 )% $ 69,495     $ 73,785 (5.8 )% Cost of sales       15,116         15,594       (3.1 )       48,872       51,997       (6.0 ) Gross margin 5,574 6,032 (7.6 ) 20,623 21,788 (5.4 ) Selling, general and administrative expenses 3,614 3,921 (7.8 ) 13,356 14,665 (8.9 ) Depreciation and amortization 612 562 8.8 2,298 2,213 3.8 Gain on sale       —         (620 )     (100.0 )       —       (620 )     (100.0 ) Earnings from continuing operations before interest expense and income taxes 1,348 2,169 (37.9 ) 4,969 5,530 (10.1 ) Net interest expense       140         152       (8.1 )       1,004       607       65.3   Earnings from continuing operations before income taxes 1,208 2,017 (40.1 ) 3,965 4,923 (19.5 ) Provision for income taxes       387         596       (35.2 )       1,296       1,602       (19.1 ) Net earnings from continuing operations 821 1,421 (42.2 )% 2,669 3,321 (19.6 )% Discontinued operations, net of tax       (4 )       5               68       42         Net earnings     $ 817       $ 1,426       (42.7 )%     $ 2,737     $ 3,363       (18.6 )%

Basic earnings/(loss) per share

Continuing operations $ 1.47 $ 2.33 (36.9 )% $ 4.62 $ 5.29 (12.7 )% Discontinued operations       (0.01 )       0.01               0.12       0.07         Net earnings per share     $ 1.46       $ 2.33       (37.5 )%     $ 4.74     $ 5.35       (11.5 )%

Diluted earnings/(loss) per share

Continuing operations $ 1.46 $ 2.31 (37.0 )% $ 4.58 $ 5.25 (12.7 )% Discontinued operations       (0.01 )       0.01               0.12       0.07         Net earnings per share     $ 1.45       $ 2.32       (37.6 )%     $ 4.70     $ 5.31       (11.6 )% Weighted average common shares outstanding Basic 559.7 610.5 (8.3 )% 577.6 627.7 (8.0 )% Dilutive impact of share-based awards       4.8         4.8               4.9       5.2         Diluted       564.5         615.3       (8.2 )%       582.5       632.9       (8.0 )% Antidilutive shares       0.1         —               0.1       —         Dividends declared per share     $ 0.60       $ 0.56       7.1 %     $ 2.36     $ 2.20       7.3 %

Note: Per share amounts may not foot due to rounding.

 

Subject to reclassification

    TARGET CORPORATION   Consolidated Statements of Financial Position               (millions) (unaudited)     January 28,2017     January 30,2016 Assets         Cash and cash equivalents, including short-term investments of $1,110 and $3,008 $ 2,512 $ 4,046 Inventory 8,309 8,601 Assets of discontinued operations 69 322 Other current assets       1,100         1,161   Total current assets 11,990 14,130 Property and equipment Land 6,106 6,125 Buildings and improvements 27,611 27,059 Fixtures and equipment 5,503 5,347 Computer hardware and software 2,651 2,617 Construction-in-progress 200 315 Accumulated depreciation       (17,413 )       (16,246 ) Property and equipment, net 24,658 25,217 Noncurrent assets of discontinued operations 12 75 Other noncurrent assets       771         840   Total assets     $ 37,431       $ 40,262   Liabilities and shareholders’ investment Accounts payable $ 7,252 $ 7,418 Accrued and other current liabilities 3,737 4,236 Current portion of long-term debt and other borrowings 1,718 815 Liabilities of discontinued operations       1         153   Total current liabilities 12,708 12,622 Long-term debt and other borrowings 11,031 11,945 Deferred income taxes 861 823 Noncurrent liabilities of discontinued operations 18 18 Other noncurrent liabilities       1,860         1,897   Total noncurrent liabilities 13,770 14,683 Shareholders’ investment

 

Common stock 46 50 Additional paid-in capital 5,661 5,348 Retained earnings 5,884 8,188 Accumulated other comprehensive loss Pension and other benefit liabilities (601 ) (588 ) Currency translation adjustment and cash flow hedges       (37 )       (41 ) Total shareholders’ investment       10,953         12,957   Total liabilities and shareholders’ investment     $ 37,431       $ 40,262  

Common Stock Authorized 6,000,000,000 shares, $.0833 par value; 556,156,228 and 602,226,517 shares issued and outstanding at January 28, 2017 and January 30, 2016, respectively.

 

Preferred Stock Authorized 5,000,000 shares, $.01 par value; no shares were issued or outstanding at January 28, 2017 or January 30, 2016.

 

Subject to reclassification

    TARGET CORPORATION   Consolidated Statements of Cash Flows             Twelve Months Ended (millions) (unaudited)    

January 28,2017

    January 30,2016 Operating activities     Net earnings $ 2,737 $ 3,363 Earnings from discontinued operations, net of tax       68         42   Net earnings from continuing operations 2,669 3,321 Adjustments to reconcile net earnings to cash provided by operations: Depreciation and amortization 2,298 2,213 Share-based compensation expense 113 115 Deferred income taxes 41 (322 ) Gain on sale — (620 ) Loss on debt extinguishment 422 — Noncash (gains) / losses and other, net — 57 Changes in operating accounts: Inventory 293 (316 ) Other assets 36 227 Accounts payable and accrued liabilities       (543 )       579   Cash provided by operating activities—continuing operations 5,329 5,254 Cash provided by operating activities—discontinued operations       107         704   Cash provided by operations       5,436         5,958   Investing activities Expenditures for property and equipment (1,547 ) (1,438 ) Proceeds from disposal of property and equipment 46 28 Proceeds from sale of business — 1,875 Other investments       28         24   Cash (required for) / provided by investing activities—continuing operations (1,473 ) 489 Cash provided by investing activities—discontinued operations       —         19   Cash (required for) / provided by investing activities       (1,473 )       508   Financing activities Additions to long-term debt 1,977 — Reductions of long-term debt (2,641 ) (85 ) Dividends paid (1,348 ) (1,362 ) Repurchase of stock (3,706 ) (3,483 ) Stock option exercises       221         300   Cash required for financing activities       (5,497 )       (4,630 ) Net (decrease) / increase in cash and cash equivalents (1,534 ) 1,836 Cash and cash equivalents at beginning of period       4,046         2,210   Cash and cash equivalents at end of period     $ 2,512       $ 4,046    

Subject to reclassification

    TARGET CORPORATION   Segment Results                               Three Months Ended         Twelve Months Ended     (millions) (unaudited)     January 28,2017    

January 30,2016 (a)

    Change     January 28,2017    

January 30,2016 (a)

    Change Sales $ 20,690     $ 21,626 (4.3 )% $ 69,495     $ 73,785 (5.8 )% Cost of sales       15,116       15,594     (3.1 )       48,872       51,997     (6.0 ) Gross margin 5,574 6,032 (7.6 ) 20,623 21,788 (5.4 ) SG&A expenses (b)       3,618       3,916     (7.6 )       13,360       14,448     (7.5 ) EBITDA 1,956 2,116 (7.6 ) 7,263 7,340 (1.1 ) Depreciation and amortization       612       562     8.8         2,298       2,213     3.8   EBIT     $ 1,344     $ 1,554     (13.5 )%     $ 4,965     $ 5,127     (3.2 )%

(a) Sales include $574 million and $3,815 million related to our former pharmacy and clinic businesses for the three and twelve months ended January 30, 2016, respectively, and cost of sales include $503 million and $3,076 million, respectively. The December 2015 sale of these businesses to CVS (Pharmacy Transaction) had no notable impact on EBITDA or EBIT.

(b) SG&A includes net profit sharing income from the arrangement with TD Bank of $174 million and $663 million for the three and twelve months ended January 28, 2017, respectively, and $163 million and $641 million for the three and twelve months ended January 30, 2016.

              Three Months Ended   Twelve Months Ended

Rate Analysis(unaudited)

  January 28,2017   January 30,2016   January 28,2017   January 30,2016 Gross margin rate 26.9 %   27.9 % 29.7 %   29.5 % SG&A expense rate 17.5 18.1 19.2 19.6 EBITDA margin rate (a) 9.5 9.8 10.5 9.9 Depreciation and amortization expense rate 3.0 2.6 3.3 3.0 EBIT margin rate (a)   6.5     7.2     7.1     6.9  

Rate analysis metrics are computed by dividing the applicable amount by sales.

(a) Excluding sales of our former pharmacy and clinic businesses, EBITDA margin rates were 10.1 percent and 10.5 percent for the three and twelve months ended January 30, 2016, respectively, and EBIT margin rates were 7.4 percent and 7.3 percent, respectively.

                    Three Months Ended     Twelve Months Ended

Sales by Channel(unaudited)

    January 28,2017    

January 30,2016 (a)

    January 28,2017    

January 30,2016 (a)

Stores 93.2 %     95.0 % 95.6 %     96.6 % Digital     6.8       5.0       4.4       3.4   Total     100 %     100 %     100 %     100 %

(a) Excluding sales of our former pharmacy and clinic businesses, stores channels sales were 94.9 percent and 96.4 percent of total sales, respectively, for the three and twelve months ended January 30, 2016, and digital channels sales were 5.1 percent and 3.6 percent of total sales, respectively.

              Three Months Ended   Twelve Months Ended

Comparable Sales(unaudited)

  January 28,2017   January 30,2016   January 28,2017   January 30,2016 Comparable sales change (1.5 )%   1.9 % (0.5 )%   2.1 % Drivers of change in comparable sales: Number of transactions 0.2 1.3 (0.8 ) 1.3 Average transaction amount   (1.6 )   0.6     0.3     0.8                       Three Months Ended     Twelve Months Ended

Contribution to Comparable Sales Change(unaudited)

    January 28,2017     January 30,2016     January 28,2017     January 30,2016 Stores channel comparable sales change (3.3 )%     0.6 % (1.5 )%     1.3 % Digital channel contribution to comparable sales change     1.8       1.3       1.0       0.8   Total comparable sales change     (1.5 )%     1.9 %     (0.5 )%     2.1 %

Note: Amounts may not foot due to rounding.

                    Three Months Ended     Twelve Months Ended

REDcard Penetration(unaudited)

    January 28,2017     January 30,2016     January 28,2017     January 30,2016 Target Debit Card 12.7 %     12.3 % 12.8 %     12.1 % Target Credit Cards     11.6       10.7       11.2       10.1   Total REDcard Penetration     24.3 %     23.0 %     24.0 %     22.3 %

Note: Amounts may not foot due to rounding.

Represents the percentage of Target sales that are paid with REDcards. Excluding pharmacy and clinic sales, total REDcard penetration would have been 23.5 percent and 23.2 percent for the three and twelve months ended January 30, 2016, respectively.

               

Number of Stores andRetail Square Feet(unaudited)

    Number of Stores     Retail Square Feet (a)     January 28,2017     January 30,2016     January 28,2017     January 30,2016 170,000 or more sq. ft. 276     278 49,328     49,688 50,000 to 169,999 sq. ft. 1,504 1,505 189,620 189,677 49,999 or less sq. ft.     22     9     554     174 Total     1,802     1,792     239,502     239,539

(a) In thousands: reflects total square feet, less office, distribution center and vacant space.

 

Subject to reclassification

 

TARGET CORPORATION

Reconciliation of Non-GAAP Financial Measures

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share from continuing operations (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our continuing operations. This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP). The most comparable GAAP measure is diluted earnings per share from continuing operations. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP. Other companies may calculate Adjusted EPS differently than we do, limiting the usefulness of the measure for comparisons with other companies.

                  Three Months Ended     January 28, 2017     January 30, 2016 (millions, except per share data) (unaudited)     Pretax     Net of Tax     Per Share     Pretax     Net of Tax     Per Share     Change GAAP diluted earnings per share from continuing operations         $ 1.46         $ 2.31 (37.0 )%

Adjustments:

Gain on sale transaction (a) $ — $ — $ — $ (620 ) $ (487 ) $ (0.79

)

 

Restructuring costs (b) — — — 3 2 — Other (c) (4 ) (2 ) — 1 1 — Resolution of income tax matters       —         —         —         —         —         —         Adjusted diluted earnings per share from continuing operations                 $ 1.45                   $ 1.52       (4.6 )%                 Twelve Months Ended January 28, 2017 January 30, 2016 (millions, except per share data) (unaudited)     Pretax     Net of Tax     Per Share     Pretax     Net of Tax     Per Share     Change GAAP diluted earnings per share from continuing operations $ 4.58 $ 5.25 (12.7 )%

Adjustments:

Loss on early retirement of debt $ 422 $ 257 $ 0.44 $ — $ — $ — Gain on sale (a) — — — (620 ) (487 ) (0.77 ) Restructuring costs (b) — — — 138 87 0.14 Impairments (d) — — — 39 29 0.05 Other (c) (4 ) (2 ) — 39 28 0.04 Resolution of income tax matters       —         (7 )       (0.01 )       —         (8 )       (0.01 )       Adjusted diluted earnings per share from continuing operations                 $ 5.01                   $ 4.69       6.7 % Note: Amounts may not foot due to rounding.

(a) Represents the gain on the Pharmacy Transaction.

(b) Costs related to our corporate restructuring announced during the first quarter of 2015.

(c) For the three and twelve months ended January 28, 2017, represents items related to the Pharmacy Transaction. For the three and twelve months ended January 30, 2016, represents costs related to the 2013 data breach.

(d) For the twelve months ended January 30, 2016, represents impairments related to our decision to wind down certain noncore operations.

 

Subject to reclassification

 

We have also disclosed after-tax return on invested capital for continuing operations (ROIC), which is a ratio based on GAAP information, with the exception of adjustments made to capitalize operating leases. Operating leases are capitalized as part of the ROIC calculation to control for differences in capital structure between us and our competitors. We believe this metric provides a meaningful measure of the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently than we do, limiting the usefulness of the measure for comparisons with other companies.

  After-Tax Return on Invested Capital                 Numerator   Trailing Twelve Months (dollars in millions) (unaudited)     January 28,2017     January 30,2016 Earnings from continuing operations before interest expense and income taxes $ 4,969   $ 5,530 + Operating lease interest (a)(b)       71         87   Adjusted earnings from continuing operations before interest expense and income taxes 5,040 5,617 - Income taxes (c)       1,648         1,827   Net operating profit after taxes     $ 3,392       $ 3,790                         Denominator

(dollars in millions) (unaudited)

    January 28,2017     January 30,2016     January 31,2015 Current portion of long-term debt and other borrowings $ 1,718 $ 815 $ 91 + Noncurrent portion of long-term debt 11,031 11,945 12,634 + Shareholders' equity 10,953 12,957 13,997 + Capitalized operating lease obligations (b)(d) 1,187 1,457 1,490 - Cash and cash equivalents 2,512 4,046 2,210 - Net assets of discontinued operations       62         226         1,479 Invested capital     $ 22,315       $ 22,902       $ 24,523 Average invested capital (e)     $ 22,608       $ 23,713                               After-tax return on invested capital       15.0 %       16.0 % (f)    

(a) Represents the add-back to operating income to reflect the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as capital leases, using eight times our trailing twelve months rent expense and an estimated interest rate of six percent.

(b) See the following Reconciliation of Capitalized Operating Leases table for the adjustments to our GAAP total rent expense to obtain the hypothetical capitalization of operating leases and related operating lease interest.

(c) Calculated using the effective tax rate for continuing operations, which was 32.7% and 32.5% for the trailing twelve months ended January 28, 2017 and January 30, 2016. For the twelve months ended January 28, 2017 and January 30, 2016, includes tax effect of $1,624 million and $1,799 million, respectively, related to EBIT and $23 million and $28 million, respectively, related to operating lease interest.

(d) Calculated as eight times our trailing twelve months rent expense.

(e) Average based on the invested capital at the end of the current period and the invested capital at the end of the prior period.

(f) Excluding the net gain on the sale of our pharmacy and clinic businesses, ROIC was 13.9 percent for the trailing twelve months ended January 30, 2016.

 

Capitalized operating lease obligations and operating lease interest are not in accordance with, or an alternative for, GAAP. The most comparable GAAP measure is total rent expense. Capitalized operating lease obligations and operating lease interest should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP.

        Reconciliation of Capitalized Operating Leases     Trailing Twelve Months (dollars in millions) (unaudited)     January 28,2017     January 30,2016     January 31,2015 Total rent expense $ 148     $ 182     $ 186 Capitalized operating lease obligations (total rent expense x 8) 1,187 1,457 1,490 Operating lease interest (capitalized operating lease obligations x 6%)       71       87       n/a  

Subject to reclassification

 

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Target CorporationInvestors:John Hulbert, 612-761-6627orMedia:Erin Conroy, 612-761-5928orTarget Media Hotline, 612-696-3400